IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

STATE OF NEW YORK ex. rel. Attorney General ELIOT SPITZER, et al.,

Plaintiffs,

v.

Civil Action No. 98-1233 (CKK)

MICROSOFT CORPORATION,

Defendant.

DIRECT TESTIMONY OF HEATHER DAVISSON

1. My name is Heather Davisson. I am one of the founders and the Chief Executive Officer of Opus-i, Inc., a small company that is both an Independent Software Vendor (“ISV”) that creates applications based on ’s .NET technologies, and an Application Service Provider (“ASP”) that provides “hosting services” for Microsoft server applications.

2. Opus-i built an entire business from the ground up based on Microsoft products and technologies. I have agreed to testify in this action because of my concern that the harmful effects that the States’ remedies will have on Microsoft’s business will cause unintended, collateral damage to other ISVs and ASPs, such as Opus-i, whose businesses are built on Microsoft’s products.

I. Background

3. I founded Opus-i in August 2000 as a one-person company. I soon brought on board three partners. I have served as the Chief Executive Officer of Opus-i since its founding, and I also serve on the company’s board of directors. As CEO, I am involved in all non-technical aspects of the company’s business.

4. Based in New York City, Opus-i is a small, privately-held company. We have approximately six full-time employees and eight part-time employees.

5. Prior to founding Opus-i, I was employed by Credit Suisse First Boston (“CSFB”), a global investment banking firm, for about three years. I was a lead technical engineer in charge of Exchange 2000 deployment. Exchange 2000 is a Microsoft messaging and collaboration server application (often referred to as a groupware product). is the directory service in Windows 2000 Server. Among other things, Active Directory with Exchange 2000 allows a company like CSFB to establish and maintain centrally e- accounts and accounts for all of its employees worldwide. Although the employees access their e-mail and instant messaging accounts on their desktop computers, those accounts reside on CSFB servers and are managed centrally by CSFB network administrators. My responsibilities at CSFB included evaluating Exchange 2000, testing it with CSFB’s computer systems, and then ultimately deploying Exchange 2000 throughout the CSFB organization.

6. Prior to CSFB, I was employed by Wal-Mart Stores Incorporated as a network administrator from 1997 to 1998. I was responsible for the security and administration of Exchange 5.0 (the predecessor of Exchange 2000) at Wal-Mart. When a new employee began working at Wal-Mart, I would create a new account for the employee on the servers, add the employee to the Windows NT and Novell directories, and add the employee to the appropriate e-mail groups.

II. Opus-i’s Product and Service Offerings

7. Opus-i currently has two main aspects of its business: (i) as an Application Service Provider (“ASP”), Opus-i hosts Microsoft server applications for small to medium sized businesses, and (ii) as an Independent Software Vendor, Opus-i develops and sells its flagship software product, Integrated Business Suites (“IBS”). Opus-i has plans to add additional products to its offerings when it obtains additional funding.

8. Both aspects of Opus-i’s business are built on Microsoft products. We chose to develop our products and services exclusively on the Microsoft platform for several reasons. First, Microsoft provides a stable, consistent development platform for ISVs. Second, we are a small company and do not currently have the resources to develop for other platforms. Third, as discussed in more detail below, IBS is built on Microsoft’s .NET technology, which allows applications to run across heterogeneous environments.

A. Hosting Services

9. Opus-i was initially founded as a company that would “host” Exchange 2000, Active Directory (the directory service in Windows 2000 Server) and Microsoft SharePoint Portal Server for small and medium-sized business customers.

10. I will illustrate the concept of “hosting” server applications by way of example. If a customer hires Opus-i to host Exchange 2000 for it, the customer is basically outsourcing to Opus-i the creation, administration and maintenance of Exchange 2000 accounts. Opus-i in effect assumes the role of network administrator for the customer. Opus-i leases server space from a company located in Texas which Opus-i uses to run Exchange 2000 for the customers to whom it provides hosting services. Using and the IBS provisioning tool discussed below, Opus-i enters all of the required information about a customer to set up an address book and secure location in the Active Directory. Once the initial set up is completed, the customer then maintains the control over its Exchange implementation using IBS, by among other things, creating new accounts for employees who are hired by the customer and by closing accounts for employees who no longer work for them. Opus-i charges its customers a per user, per month fee to host Exchange 2000 or other server applications.

11. Active Directory is the directory service in Windows 2000 Server. Active Directory is like a phone book that contains information about each person’s user ID, passwords, and other identifying information. When an employee logs onto Exchange to get their e-mail, they have to enter a user ID and password. Exchange 2000 then consults the information stored in Active Directory in Windows 2000 Server to verify that the employee is who he says he is. This process is often referred to as “authentication.” For that reason, customers who ask Opus-i to host Exchange 2000 for them often also have us host Active Directory for them.

12. Opus-i also hosts Microsoft SharePoint Portal Server for its customers, which is Microsoft’s server-based document management system product. Law firms often utilize document management system products to allow several lawyers to work on the same document. One lawyer can “check out” a document, which prevents her colleagues from editing that document until she checks it back in. Once the lawyer “checks in” the document, she can save it as a new version of the original document.

B. IBS

13. During the course of providing hosting services to our customers, Opus-i determined that we needed a provisioning tool to assist us in administering Exchange 2000 and Active Directory for our customers and to grant control to the customers. A provisioning tool allows a network administrator to access an application for the purpose of giving users access to the application (e.g., creating an e-mail account for a new employee), or making changes to the data stored in the application (e.g., changing an employee’s last name). Although there were provisioning tools available on the market, they were too expensive and/or did not meet our requirements. Because “necessity is the mother of invention,” Opus-i developers created their own provisioning tool from scratch. We then realized that this tool created a business opportunity for Opus-i, because other companies who administered Exchange 2000 internally or in a hosted environment could use it. Thus, Integrated Business Suites (“IBS”) was born.

14. IBS is Opus-i’s flagship product that was just released in February 2002. Built on XML Web Services and Microsoft’s .NET technology (discussed in more detail below), IBS provides a platform that integrates all of a company’s applications, permitting the exchange of data (wherever located) across diverse platforms. IBS enables a company’s data to be shared easily and securely with applications residing on any other platform.

15. IBS has three major components: (1) a web portal that allows network administrators and other authorized users to access and manage applications; (2) a web-based application management tool that allows a network administrator to provision or administer multiple applications using one common and easy to use interface; and (3) the ability to share data among various applications.

16. IBS is a web-based application that runs on a Microsoft server . The network administrator accesses the IBS portal from a desktop computer (called a client) using Microsoft’s Internet Explorer web browser. Internet Explorer is thus the interface to the IBS product. 17. Using Internet Explorer on the client, a network administrator would access a web page, authenticate herself, and then the IBS portal would appear on the computer screen. Using the administration and provisioning tool portion of IBS, the network administrator could then increase the amount of disk space an employee has or grant a new employee rights to access an application.

18. It is Opus-i’s intention to develop in the near future “connectors,” or pieces of software code based on the .NET Framework, that will allow IBS to communicate and share data (i) with “legacy applications,” which are pre-existing applications that our customers already use, such as the PeopleSoft human resources database, and (ii) with third party application providers, such as Paychex.com, a company that generates paychecks for other companies’ employees. Once Opus-i develops these connectors, a network administrator will be able, through a single administration point (the IBS portal), to enter all types of employee data (e.g., name, user ID, password, salary, hours billed, client/matter charge numbers, travel expenses, etc.) and that data can then be utilized by many different applications or third party service providers.

19. To illustrate this concept using a very simple example, assume that an employee of a company changed his or her name. The company’s network administrator can log into IBS and change that information. Automatically, that data will be shared with the Exchange e-mail application, the human resources database, and the payroll application. Consequently, the employee’s e-mail address would be changed to reflect his or her new name, the employee’s personnel records would be updated to reflect the new name, the employee’s paychecks would reflect the name change.

IBS eliminates the need to input the same information multiple times, in multiple formats, in multiple places, with multiple tools.

III. IBS Is Built on Microsoft’s .NET Technology.

20. .NET is Microsoft’s new platform for building, deploying, operating and integrating XML (Extensible Markup Language) Web Services. Web Services represent a new model of computing that enables any application on any computer or device to seamlessly exchange data and interoperate with any other application. Thus, .NET allows a company to run applications across heterogeneous computing environments.

21. Microsoft has been a leader in developing industry standards for XML-based Web Services. Microsoft’s .NET initiative is based on open standards including Extensible Markup Language (“XML”), Simple Object Access Protocol (“SOAP”), Uniform Device Description Interface (“UDDI”), and Web Services Description Language (“WSDL”).

22. Opus-i built IBS on Microsoft’s .NET technology using Microsoft’s .NET programming tools, called Visual Studio .NET. Because .NET relies on open standards, IBS is indifferent to the location of the data it provisions. For example, if an attorney used IBS to enter her hours worked and client expenses into a time and expense application running on a Windows NT server, that data could, through a “connector” be shared with the client billing program running on an Oracle database on a Sun server to generate a bill for the client. Using .NET, IBS can access and share data seamlessly across heterogeneous platforms.

IV. The Future Capabilities of Opus-i and .NET

23. To illustrate the full potential of .NET and what it is capable of doing in the future, I will use a hypothetical example of areas into which Opus-i is considering expanding and how .NET would make the transfer of data across multiple platforms seamless and virtually effortless. During my direct testimony, I will use a demonstrative exhibit to depict this hypothetical transaction graphically.

24. Assume that Mr. Smith, an employee of ABC Company, needs to order a new laptop computer for his professional use. Using Internet Explorer on his desktop computer, Mr. Smith could access the IBS portal and enter into ABC’s Supply Chain procurement application all the requirements for his new laptop computer (e.g., RAM, Operating System, DVD Drive, etc).

25. The procurement program, using .NET technologies, could send a request to several OEMs asking for their best price on such a laptop. Because .NET is based on open standards, it does not matter what server operating system the OEM is running on its server. (.NET has just recently been launched, so until .NET is widely deployed, it will be necessary for each OEM server to have a .NET Framework installed on the server so that it can execute .NET applications.) For example, Dell might be running Linux on a Dell server, IBM may be running a mainframe computer, Compaq could be running Windows on its server, and Hewlett-Packard could be running UNIX on its server. Mr. Smith’s laptop requirements would be transferred to each OEM server in XML format.

26. The OEMs would then send their price quotes back to the IBS database. If ABC Company required supervisor approval to make the purchase, IBS could use the instant messaging technology built into the Windows desktop operating system to determine which of Mr. Smith’s supervisors was in the office and currently on e-mail. IBS could then send an instant message to Mr. Smith’s supervisor asking him to approve the purchase of Mr. Smith’s laptop. Once approval was obtained, IBS could enter the order with the OEM which had the lowest price and send Mr. Smith an e- mail notifying him that the order had been placed. All of this is accomplished seamlessly and with very little human intervention. The entire procurement process can be automated using .NET technologies, IBS and the Internet Explorer and instant messaging functionalities built into the Windows desktop operating system.

V. Creating Multiple Non-Standard Versions of Windows Would Cripple Opus-i From a Development and Testing Standpoint.

27. Opus-i is a small company. We currently employ 2 software developers and 1 software tester. IBS took approximately 6 months to develop, and approximately 2 of those months were consumed with testing. Opus-i currently tests IBS on Windows 95, Windows 98, Windows NT, Windows 2000 and Windows XP (including the various Service Release Packs for each version). Approximately 25-50% of our development process is consumed by testing.

28. If third parties were permitted to remove large blocks of software code from Windows desktop operating systems, it would have negative consequences for Opus-i and its customers.

29. First, because Windows has historically provided a stable and consistent development platform for ISVs, it has attracted huge numbers of ISVs to write applications to the Windows platform. However, permitting third parties to remove large blocks of software code would de-stabilize the Windows platform and make it a much less attractive development platform for ISVs. Consumers would ultimately suffer as a result of the decrease in available applications or the increase in price for such applications.

30. Second, removing various components of Windows to create multiple, non-standard versions of Windows desktop operating systems would significantly increase Opus-i’s development and testing costs. Because we are a small ISV, the additional testing burden could put us out of business. As discussed above, we currently test IBS with 4 different versions of Windows, which consumes 25-50% of our development time. Even if we simply doubled the number of versions of Windows we were required to test from 5 to 10, at our current staffing levels, the necessary testing would consume 50-100% of our development time. If we had to add additional testers or divert software developers’ time to testing, we would have fewer resources to devote to innovating and creating new products for our customers. This would ultimately harm our customers by offering them fewer choices.

31. The additional testing burden that the States’ remedies would impose on developers is not unique to Opus-i. As an ISV, I am also concerned that requiring Microsoft to test multiple versions of Windows with various combinations of “Middleware” removed would dramatically increase both its development costs and the time to market for its new products. If, as a result, Microsoft had fewer resources to devote to innovating and creating new features in its products, the entire industry would suffer. ISVs, like Opus-i, who build their businesses on Microsoft’s innovations would have to wait longer for new features and innovations to become available, which would slow innovation by ISVs (as they are dependent on the release of the new features). Consumers would ultimately suffer because there would be fewer features available in Windows and fewer applications to run on Windows.

32. In sum, Microsoft’s continual development of new and improved software products and services stimulates innovation throughout the computer industry. VI. Removing Internet Explorer From Windows Would Make It More Difficult for Users To Access Web-Based Applications, such as IBS.

33. The inclusion of Internet Explorer in Windows desktop operating systems supports the development of Web-based applications that run on Microsoft and non-Microsoft server operating systems alike. The presence of Internet Explorer in Windows ensures that users can access web-based applications easily.

34. As discussed above, IBS uses Internet Explorer on the client as the interface to access the IBS portal. Opus-i made a conscious decision to support only the Internet Explorer browser because of its superior performance and functionality. In addition, because Opus-i is a small company, currently, we simply do not have the resources to devote to making IBS work with multiple browsers.

35. If Internet Explorer were removed from the Windows desktop operating system, our clients would not be able to access IBS. Because Opus-i relies on the presence of Internet Explorer on a large percentage of Windows desktops, we would be disadvantaged if Internet Explorer were removed, because our customers would find it more difficult to access IBS.

36. Although it is technically possible for Opus-i to require the installation of Internet Explorer on the desktop computers of a customer who is purchasing IBS, the practical realities are that corporate customers are loathe to do this. Based on my experience at CSFB and Wal-Mart, I have learned that corporate customers are very hesitant to allow any software to be installed in their closed corporate environment without first having tested it extensively in their testing lab. That is particularly true of components of the operating system. Many corporate customers go so far as to “lock down” their desktop computers so that new software can only be downloaded by the network administrator. This is a response to a well-known phenomenon called DLL Hell, in which the installation of applications that themselves include updated components of Windows operating systems result in substantial incompatibilities. Based on my experience, it is difficult to convince a corporate customer to deploy additional software on their client computers.

VII. Microsoft’s Disclosures are Very Good.

37. In my experience at Opus-i, I have found Microsoft’s disclosures to be sufficient for us to be able to write our IBS application that runs on a Microsoft server, interoperates with Microsoft desktop operating systems, and interoperates with other Microsoft products. Microsoft discloses large volumes of information to ISVs to assist them in creating applications to run on Windows operating systems. For a modest fee, Opus-i became a Microsoft Certified Partner, which entitles us, among other things, to use the technical information available to ISVs on the Microsoft Developers Network. As a Certified Partner, Opus-i also receives beta releases of Microsoft’s products well in advance of the product’s commercial release. Opus-i developed IBS using the beta releases of .NET that we received from Microsoft. Because of the access we had to the .NET betas, our IBS product was commercially available when Microsoft officially launched .NET in February 2002.

38. Microsoft also holds periodic conferences, workshops and classes that developers can attend. While at Opus-i, I attended a two-day course sponsored by Microsoft at its Redmond campus on the subject of upgrading from Microsoft Exchange Server 5.5 to Microsoft Exchange 2000. Both at CSFB and at Opus-i, I have attended Tech Ed conferences sponsored by Microsoft to inform developers about its new products. And as a Certified Partner, we regularly receive invitations to various workshops that Microsoft holds for its partners.

VIII. Disclosure of Source Code Would Be Harmful to the Industry.

39. I believed that requiring Microsoft to disclose its source code for Windows to its competitors would stifle innovation in the computer industry. If Microsoft were forced to reveal the source code for its innovations in Windows to its competitors, it will have little incentive to innovate in the future. ISVs that build their businesses on Microsoft’s innovations will be harmed by the lack of future innovation, and consumers will be harmed by the lack of new features in the Windows operating systems and the lack of innovative applications to run on them.

I declare under penalty of perjury that the foregoing is true and correct.

Executed on April ___, 2002 at New York, New York.

______

Heather Davisson